WE FOCUS. WE GROW. A N N U A L G E N E R A L M E E T I N G 2016
[ C O N V E N I E N C E T R A N S L A T I O N ] I N V I T A T I O N T O T H E A N N U A L G E N E R A L M E E T I N G O F L E G I M M O B I L I E N A G O N 1 9 M A Y 2 0 1 6 ISIN: DE 000LEG1110 WKN: LEG 111 LEG Immobilien AG Düsseldorf Dear Shareholders, We are pleased to invite you to the Annual General Meeting of LEG Immobilien AG on Thursday, 19 May 2016, at 10:00 a.m. at Van der Valk Airport Hotel, Am Hülserhof 57, 40472 Düsseldorf. 2
A G E N D A 1. Presentation of the adopted annual financial statements, the approved consolidated financial statements, the management reports of LEG Immobilien AG and the Group, the explanatory report contained in the management reports on the information required pursuant to section 289 (4), section 315 (4) of the German Commercial Code (HGB), and the report of the Supervisory Board for fiscal year 2015 These documents have been published on the Internet at http://www.leg-wohnen.de/en/ corporation/investor-relations/annual-general-meeting/. They will be also available at the Annual General Meeting and will be explained there by the Management Board and where the report of the Supervisory Board is concerned by the chairman of the Supervisory Board. The Supervisory Board has approved the annual financial statements and the consolidated financial statements prepared by the Management Board. The annual financial statements are therefore adopted pursuant to section 172 sentence 1, clause 1 of the German Stock Corporation Act (AktG). Pursuant to the statutory provisions, the agenda does not call for the adoption of a resolution on this point. 3
2. Resolution on the appropriation of the net retained profit for fiscal year 2015 The Management Board and the Supervisory Board propose using the net retained profit for fiscal year 2015 in the amount of EUR 148,467,594.89 as follows: Distribution of EUR 2.26 in dividends for each share that is entitled to dividends: EUR 141,859,720.88 Transfer to revenue reserves: EUR 0.00 Profit carried forward: EUR 6,607,874.01 Net retained profit: EUR 148,467,594.89 The proposal on the appropriation of the profit is based on the 62,769,788 shares that, to the Company s knowledge, were entitled to dividends on the date of the preparation of the annual financial statements by the Management Board for the previous fiscal year 2015. Should the number of these shares that are entitled to dividends change by the time of the General Meeting, an adjusted proposal for a resolution will be made at the General Meeting which offers the same dividend of EUR 2.26 for each share entitled to dividends for the previous fiscal year 2015. The amount apportionable to shares which are not entitled to dividends will be carried forward to new account. As the dividend will be distributed in full from the tax contribution account within the meaning of section 27 of the German Corporation Tax Act (KStG) (contributions not paid into the nominal capital), it will be paid out without deduction of corporation tax and solidarity surcharge. The dividend will not be subject to income taxes pursuant to section 20 (1) sentence 1 no. 1 of the German Income Tax Act (EStG). The dividend will not be associated with tax refunds or tax crediting. 4
3. Resolution on the ratification of the actions of the Management Board of LEG Immobilien AG for fiscal year 2015 The Management Board and the Supervisory Board propose that the actions of the members of the Management Board of LEG Immobilien AG in office in fiscal year 2015 be ratified for this period. 4. Resolution on the ratification of the actions of the Supervisory Board of LEG Immobilien AG for fiscal year 2015 The Management Board and the Supervisory Board propose that the actions of the members of the Supervisory Board of LEG Immobilien AG in office in fiscal year 2015 be ratified for this period. 5. Resolution on the appointment of the auditor and group auditor for fiscal year 2016 The Supervisory Board, based on the recommendation given by the audit committee, proposes that the following resolution be adopted: a) PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, with its place of business in Frankfurt/Main, is hereby appointed as auditor and group auditor for fiscal year 2016. b) PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, with its place of business in Frankfurt/Main, is hereby also appointed as auditor for the review of the abridged financial statements and the interim management report (sections 37w (5), 37y, no. 2 of the German Securities Trading Act (WpHG)) for the first six months of fiscal 5
year 2016 and, if applicable, other financial information during the year within the meaning of section 37w (7) of the German Securities Trading Act drawn up prior to the Annual General Meeting in 2017, insofar as the Management Board decides to have such a review of abridged financial statements and an interim management report carried out. 6. Resolution on the election of a new Supervisory Board member Mr. Jürgen Schulte-Laggenbeck resigned as member of LEG Immobilien AG s Supervisory Board with effect as of 31 December 2015. This means that the General Meeting must elect a Supervisory Board member to succeed Mr. Jürgen Schulte-Laggenbeck. Under sections 95, 96 (1), 101 (1) of the German Stock Corporation Act as well as section 8.1 of LEG Immobilien AG s Articles of Association, the Supervisory Board comprises of six members to be elected by the General Meeting. The Supervisory Board based on a corresponding proposal by the nomination committee of the Supervisory Board proposes that the following resolution be adopted: Dr. Claus Nolting, resident in Munich, self-employed lawyer and consultant to Lone Star Germany Acquisitions GmbH, is hereby elected to the Supervisory Board. Pursuant to section 8.2 of LEG Immobilien AG s Articles of Association, he is appointed for the period up to the end of the General Meeting deciding on the ratification of the actions of the members of the Supervisory Board for fiscal year 2020. 6
Information pursuant to section 125 (1), sentence 5 of the German Stock Corporation Act and pursuant to section 5.4.1 (5) to (7) of the German Corporate Governance Code Memberships in supervisory boards required by law and comparable supervisory bodies: Dr. Nolting is a member of the supervisory boards required by law of the following companies: IKB Deutsche Industriebank Aktiengesellschaft, Düsseldorf; TLG IMMOBILIEN AG, Berlin, and Hamburg Trust REIM Real Estate Investment Management GmbH, Hamburg. According to the Supervisory Board s assessment, there are no personal or business relationships between Dr. Nolting and the companies and bodies of LEG Immobilien AG or the shareholders with a significant stake in LEG Immobilien AG, the disclosure of which relationships is recommended by section 5.4.1 (5) of the German Corporate Governance Code. Further information on the candidate has been published on the Internet at http://www.legwohnen.de/en/corporation/investor-relations/annual-general-meeting/. 7. Resolution on the Cancellation of the Authorized Capital 2015, Creation of a new Authorized Capital 2016 and corresponding change in the Articles of Association By General Meeting resolution of 24 June 2015, the Management Board was authorized to increase, with the approval of the Supervisory Board, the Company's share capital once or several times until 23 June 2020 by up to EUR 28,531,722.00, in total, by issuing up to 28,531,722 new registered shares against cash and/or in-kind capital contributions (Authorized Capital 2015). 7
With the approval of the Supervisory Board and as confirmed by the Supervisory Board s executive committee, LEG Immobilien AG decided on 12 November 2015 to use part of the Authorized Capital 2015 and to increase the Company s share capital by a nominal amount of EUR 4,510,000.00 against issue of 4,510,000 new registered shares in the Company that are entitled to dividends for fiscal year 2015, excluding shareholder subscription rights. The capital increase took effect upon entry of performance into the commercial register on 13 November 2015. The Authorized Capital 2015 is therefore no longer available in full. In particular, the Management Board is only authorized to undertake a restricted capital increase subject to simplified exclusion of subscription rights. The Management Board and Supervisory Board believe it reasonable to continue to allow the Company to increase the share capital on short notice under exclusion of the subscription right in order to give the Company flexibility for further growth and any possible acquisitions which may present themselves. The Authorized Capital is to amount to the statutory maximum limit of half of the share capital existing at the time that the resolution is taken. The plan is thus to resolve on a new Authorized Capital 2016, which in terms of content largely corresponds to the Authorized Capital 2015. The Management Board and the Supervisory Board therefore propose to adopt the following resolutions: a. Cancellation of the existing Authorized Capital 2015 The Authorized Capital 2015 is cancelled. 8
b. Creation of new Authorized Capital 2016 The Management Board is authorized to increase, with the approval of the Supervisory Board, the Company's share capital once or several times until 18 May 2021 by up to EUR 31,384,894.00, in total, by issuing up to 31,384,894 new registered shares against cash and/or in-kind capital contribution (Authorized Capital 2016). Shareholders are to be basically granted a statutory right to subscribe to the new shares. The Management Board may, however, with the approval of the Supervisory Board, exclude the shareholders' subscription right once or several times, in full or in part, as provided in detail hereinafter: (1) in order to exclude the shareholders' subscription rights for fractional amounts; (2) if and in as far as this is necessary to grant the bearers or creditors of conversion and/or option rights, and/or the bearers or creditors of financing instruments carrying conversion and/or option obligations, which are issued by the Company or by a domestic or foreign company, in which the Company holds directly or indirectly the majority of the votes and capital, a subscription right to an extent they would be entitled to after the exercise of the conversion or option rights or after the fulfillment of a conversion or option obligation; (3) in case of a capital increase against cash contributions pursuant or according to section 186 (3) sentence 4 of the German Stock Corporation Act, if the par value of the new shares is not substantially lower than the stock exchange price of the already listed shares, and if the new shares, which were issued under exclusion of the subscription right, do not exceed a calculated total 9
amount of 10% of the share capital either at the time of said Authorized Capital 2016 taking effect or at the time of said Authorized Capital 2016 being utilized. Said restriction to 10% of the share capital applies also to the proportional amount of the share capital that is apportionable to shares, which are sold under exclusion of the subscription right during the term of the Authorized Capital 2016 based on an authorization to sell own shares pursuant or according to section 71 (1) no. 8 sentence 5, section 186 (3) sentence 4 of the German Stock Corporation Act. Moreover, said restriction applies also to the proportional amount of the share capital that is apportionable to shares, which are issued during the term of the Authorized Capital 2016 based on other authorizations to issue shares of the Company under exclusion of the shareholders' subscription right in direct or corresponding application of section 186 (3) sentence 4 of the German Stock Corporation Act. Furthermore, said restriction applies also to the proportional amount of the share capital that is apportionable to shares, which may or must be issued in order to service bonds carrying a conversion and/or option right or a conversion and/or option obligation, to the extent that the bonds are issued during the term of the Authorized Capital 2016 under exclusion of the shareholders' subscription right in corresponding application of section 186 (3) sentence 4 of the German Stock Corporation Act. 10
(4) in case of capital increases against in-kind capital contributions, in particular in order to grant shares for the purpose of acquiring (also indirectly) companies, assets, participations, other assets, real estates and real estate portfolios that are connected to an acquisition plan; (5) limited to the issuance of up to 1,426,586 new registered shares against cash contribution, if this is necessary to issue shares to the Company's employees or its affiliated companies in terms of section 15 of the German Stock Corporation Act. To the extent permitted by applicable law, the employee shares may also be issued such that the contribution to be paid for them is covered by that portion of the annual surplus, which the Management Board and Supervisory Board may allocate to other revenue reserves under section 58 (2) of the German Stock Corporation Act. The new shares may also be issued to an appropriate credit institution that will take on such shares with the undertaking to pass them on only to the Company's employees or to companies affiliated with the Company in terms of section 15 of the German Stock Corporation Act. The sum of shares that are issued based on the Authorized Capital 2016 under exclusion of the shareholders' subscription right, must not exceed a calculated amount of 20% of the share capital either at the time of said authorization taking effect or at the time of said authorization being utilized, taking into account other shares of the Company that are sold or issued under exclusion of the subscription right during the term of the Authorized Capital 2016 or that are to be issued based on bonds that were issued under exclusion of the subscription right after 19 May 2016. It does not, however, apply to shares that are to be issued based on the convertible bonds issued by the Company in April 2014. If and in as far as the subscription right is not excluded under the above provisions, it may be granted 11
to the shareholders also in form of an indirect subscription right pursuant to section 186 (5) of the German Stock Corporation Act or, in part, also in form of a direct subscription right (e.g. for shareholders who are entitled to subscription and have previously issued a confirmed subscription declaration ("Festbezugserklärung")), and otherwise in form of an indirect subscription right pursuant to section 186 (5) of the German Stock Corporation Act, if so determined by the Management Board with the approval of the Supervisory Board. The Management Board is moreover authorized to establish the further details of the capital increase and its performance, in particular the contents of the share rights and the terms and conditions of share issuance, with the approval of the Supervisory Board. c. Change in the Articles of Association (1) Sec. 4.1 of the Articles of Association is changed and reformulated as follows: "4.1 The Management Board is authorized to increase, with the approval of the Supervisory Board, the Company's share capital once or several times until 18 May 2021 by up to EUR 31,384,894.00, in total, by issuing up to 31,384,894 new registered shares against cash and/or in-kind capital contribution (Authorized Capital 2016). Shareholders are to be basically granted a statutory right to subscribe to the new shares. The Management Board may, however, with the approval of the Supervisory Board, exclude the shareholders' subscription right once or several times, in full or in part, as provided in detail hereinafter: a. in order to exclude the shareholders' subscription rights for fractional amounts; 12
b. if and in as far as this is necessary to grant the bearers or creditors of conversion and/or option rights, and/or the bearers or creditors of financing instruments carrying conversion and/or option obligations, which are issued by the Company or by a domestic or foreign company, in which the Company holds directly or indirectly the majority of the votes and capital, a subscription right to an extent they would be entitled to after the exercise of the conversion or option rights or after the fulfillment of a conversion or option obligation; c. in case of a capital increase against cash contributions pursuant or according to section 186 (3) sentence 4 of the German Stock Corporation Act, if the par value of the new shares is not substantially lower than the stock exchange price of the already listed shares, and if the new shares, which were issued under exclusion of the subscription right, do not exceed a calculated total amount of 10% of the share capital either at the time of said Authorized Capital 2016 taking effect or at the time of said Authorized Capital 2016 being utilized. Said restriction to 10% of the share capital applies also to the proportional amount of the share capital that is apportionable to shares, which are sold under exclusion of the subscription right during the term of the Authorized Capital 2016 based on an authorization to sell own shares pursuant or according to section 71 (1) no. 8 sentence 5, section 186 (3) sentence 4 of the German Stock Corporation Act. Moreover, said restriction applies also to the proportional amount of the share capital that is apportionable to shares, which are issued during the term of the Authorized Capital 2016 based on other authorizations to issue shares of the Company under exclusion of the shareholders' subscription right in direct or corresponding application of section 186 (3) sentence 4 of the German Stock Corporation Act. Furthermore, said restriction applies also to the proportional amount of the share capital that is apportionable to shares, which may or must be issued in order to service bonds 13
carrying a conversion and/or option right or a conversion and/or option obligation, to the extent that the bonds are issued during the term of the Authorized Capital 2016 under exclusion of the shareholders' subscription right in corresponding application of section 186 (3) sentence 4 of the German Stock Corporation Act. d. in case of capital increases against in-kind capital contributions, in particular in order to grant shares for the purpose of acquiring (also indirectly) companies, assets, participations, other assets, real estates and real estate portfolios that are connected to an acquisition plan; e. limited to the issuance of up to 1,426,586 new registered shares against cash contribution, if this is necessary to issue shares to the Company's employees or its affiliated companies in terms of section 15 of the German Stock Corporation Act. To the extent permitted by applicable law, the employee shares may also be issued such that the contribution to be paid for them is covered by that portion of the annual surplus, which the Management Board and Supervisory Board may allocate to other revenue reserves under section 58 (2) of the German Stock Corporation Act. The new shares may also be issued to an appropriate credit institution that will take on such shares with the undertaking to pass them on only to the Company's employees or to companies affiliated with the Company in terms of section 15 of the German Stock Corporation Act. The sum of shares that are issued based on the Authorized Capital 2016 under exclusion of the shareholders' subscription right, must not exceed a calculated amount of 20% of the share capital either at the time of said authorization taking effect or at the time of said authorization being utilized, taking into account other shares of the Company that are sold or issued under exclusion of the subscription right during the term of the Authorized Capital 14
2016 or that are to be issued based on bonds that were issued under exclusion of the subscription right after 19 May 2016. It does not, however, apply to shares that are to be issued based on the convertible bonds issued by the Company in April 2014. If and in as far as the subscription right is not excluded under the above provisions, it may be granted to the shareholders also in form of an indirect subscription right pursuant to section 186 (5) of the German Stock Corporation Act or, in part, also in form of a direct subscription right (e.g. for shareholders who are entitled to subscription and have previously issued a confirmed subscription declaration ("Festbezugserklärung"), and otherwise in form of an indirect subscription right pursuant to section 186 (5) of the German Stock Corporation Act, if so determined by the Management Board with the approval of the Supervisory Board. The Management Board is moreover authorized to establish the further details of the capital increase and its performance, in particular the contents of the share rights and the terms and conditions of share issuance, with the approval of the Supervisory Board. The Management Board is instructed to apply for the registration of the cancellation of the Authorized Capital 2015 and the creation of the new Authorized Capital 2016 in the Commercial Register of the Company, subject to the proviso of such cancellation of the Authorized Capital 2015 being registered only if it has been ensured that the change in section 4.1 of the Articles of Association will be registered promptly thereafter. 15
8. Resolution on the cancellation of the authorization resolved upon by the General Meeting on 24 June 2015 to issue convertible and/or warrant bonds and/or participation rights carrying an option and/or conversion right, the creation of a new authorization vested in the Supervisory Board to issue convertible and/or warrant bonds as well as participation rights carrying an option and/or conversion right (or a combination of such instruments), including an authorization to exclude the subscription right, changing the Conditional Capital 2013/2015, and changing the Articles of Association accordingly. The Management Board s authorization resolved upon by the General Meeting on 24 June 2015 to issue convertible and/or warrant bonds and/or participation rights carrying an option and/or conversion right (2015 Authorization) of which the Company has not yet made use includes an authorization to exclude the subscription right according to section 186 (3) sentence 4 German Stock Corporation Act ( simplified exclusion of subscription rights ). However, said authorization to undertake simplified exclusion of subscription rights is limited to bonds carrying rights to shares, to which a proportional amount of the share capital of not more than 10 percent of the total share capital is attributable. The shares issued by the Company utilizing the Authorized Capital 2015 are among those to which this 10 percent limit applies. The Management Board and Supervisory Board believe it reasonable to continue to allow the Company to issue convertible and/or warrant bonds as well as participation rights carrying an option and/or conversion right (or a combination of such instruments) by excluding subscription rights. Only a limited part of the 2015 Authorization remains available for this. The Management Board and Supervisory Board thus believe it appropriate to cancel the 2015 Authorization and to replace it with a new one that largely equals the 2015 Authorization. 16
So far, the Conditional Capital 2013/2015 in article 4.2 of the Articles of Association served only for granting new shares to creditors of bonds that were issued based on the authorization granted by the General Meeting on 17 January 2013 or 24 June 2015. The Conditional Capital 2013/2015 is to be changed such as to serve also for issuing shares to creditors of bonds, which will be issued based on the authorization that is yet to be granted under agenda item 8b. The Management Board and the Supervisory Board therefore propose to adopt the following resolutions: a. Cancellation of Authorization resolved upon by the General Meeting on 24 June 2015 to issue convertible and/or warrant bonds and/or participation rights carrying an option and/or conversion right (or a combination of such instruments) The Management Board s authorization resolved upon by the General Meeting on 24 June 2015 under agenda item 8b to issue convertible and/or warrant bonds and/or participation rights carrying an option and/or conversion right (or a combination of such instruments) is cancelled. b. Authorization to issue convertible and/or warrant bonds and/or participation rights carrying an option and/or conversion right (or a combination of such instruments) (1) Nominal amount, duration of the authorization, number of shares The Management Board is authorized to issue, with the approval of the Supervisory Board, once or several times until 18 May 2021 bearer or registered convertible and/ 17
or warrant bonds and/or participation rights carrying an option and/or conversion right (or a combination of such instruments) in the nominal amount of up to EUR 1,200,000,000.00 with or without limited maturity (hereinafter referred to collectively as "Bonds"), and to grant the creditors of Bonds conversion and/or option rights on shares of the Company with a proportional amount of the share capital of up to EUR 31,384,894.00, as detailed in the terms and conditions of the respective option and/or convertible bonds or of the respective participation rights (hereinafter referred to in each case as "Terms and Conditions"). The respective Terms and Conditions may also provide for a mandatory conversion at the end of maturity or at other times, including an obligation to exercise the conversion/option right. The Bonds are to be issued against cash. The Bonds may be issued not only in euros but also in the legal currency of an OECD country, as long as the corresponding EUR-equivalent is not exceeded. The Bonds may be issued also by domestic or foreign companies, in which the Company holds directly or indirectly the majority of the votes and capital; in that case, the Management Board is authorized to provide a guarantee for the Bonds on behalf of the Company and to grant the creditors of such Bonds conversion and/or option rights on shares of the Company. When Bonds are issued, they may or will be generally divided into partial debentures carrying equal rights. 18
(2) Granting of subscription rights, exclusion of subscription rights Shareholders are to be basically granted a right to subscribe to the Bonds. The Management Board may, however, with the approval of the Supervisory Board, exclude the shareholders' right to subscribe to the Bonds, a. in order to exclude subscription rights for fractional amounts; b. if this is necessary to grant the bearers or creditors of conversion and/or option rights, or the creditors of convertible bonds and/or convertible participation rights carrying conversion obligations, which were or will be issued by the Company or by domestic or foreign companies, in which the Company holds directly or indirectly the majority of the votes and capital, a subscription right to an extent they would be entitled to as shareholders after the exercise of the option or conversion rights or after the fulfillment of conversion obligations; and c. if the Management Board arrives at the conclusion that the issue price does not in terms of section 221 (4) sentence 2, section 186 (3) sentence 4 of the German Stock Corporation Act fall short, substantially, of the theoretical value of the partial debentures, as determined in accordance with generally accepted actuarial methods. However, said authorization to exclude subscription rights applies only to Bonds carrying rights to shares, to which a proportional amount of the share capital of not more than 10 percent of the share capital is attributable either at the time of said authorization taking effect or at the time of said authorization being exercised. Said restriction applies also to own shares, if and in as far as they are sold by the Company during the duration of said authorization under exclusion of the subscription right pursuant to or according 19
to section 71 (1) no. 8 sentence 5, clause 2, section 186 (3) sentence 4 of the German Stock Corporation Act. Moreover, said restriction applies also to such shares that are issued during the duration of said authorization from authorized capital, under exclusion of the subscription right pursuant to section 203 (2) sentence 2, section 186 (3) sentence 4 of the German Stock Corporation Act or based on other authorizations to issue shares of the Company under exclusion of the shareholders' subscription right in direct or corresponding application of section 186 (3) sentence 4 of the German Stock Corporation Act. The sum of shares that are to be issued based on Bonds, which are issued based on said authorization under exclusion of the shareholders' subscription right, must not exceed a proportional amount of 20% of the share capital either at the time of said authorization taking effect or at the time of said authorization being utilized, taking into account other shares sold or issued under exclusion of the subscription right after 19 May 2016. It does not, however, apply to shares that are to be issued based on the convertible bonds issued by the Company in April 2014. If and in as far as the subscription right is not excluded under the above provisions, it may be granted to the shareholders also in form of an indirect subscription right pursuant to section 186 (5) of the German Stock Corporation Act or, in part, also in form of a direct subscription right, and otherwise in form of an indirect subscription right pursuant to section 186 (5) of the German Stock Corporation Act, if so determined by the Management Board with the approval of the Supervisory Board. 20
(3) Conversion right, conversion obligation In the case of the issue of Bonds carrying a conversion right, the bearers or creditors may convert their Bonds/participation rights into Company shares subject to the Terms and Conditions. The proportional amount of the share capital of the shares to be issued at the time of conversion must not exceed the nominal amount of the convertible bond or of the convertible participation right, or an issue price of the bond or participation right that is lower than the nominal amount. The exchange ratio is determined when dividing the nominal amount or an issue price of a bond, which price is lower than the nominal amount, by the fixed conversion price for a share of the Company. The exchange ratio can be rounded up or down to an integer; moreover, a cash adjustment can be determined. For the rest, it can be provided to combine fractions and/or settle them in cash. The Terms and Conditions may also provide for a variable exchange ratio. In case of a conversion obligation, the Company may be authorized in the Terms and Conditions to settle in cash, in whole or in part, at the time of the mandatory conversion any difference between the nominal amount of the convertible bonds and/ or participation rights carrying an option and/or conversion right and the product of the exchange ratio and a stock exchange price of the shares that is to be defined in the Terms and Conditions. The stock exchange price to be applied for purposes of the calculation according to the above sentence is at least 80% of the share's market price that is relevant for the lower limit of the conversion price pursuant to Sec. (5). 21
(4) Option right When warrant bonds are issued, each bond is equipped with one or more subscription warrants entitling the bearer and/or creditor to subscribe to Company shares, as detailed in the terms and conditions of the options that are to be established by the Management Board. The proportional amount of the share capital of the shares to be subscribed to per bond must not exceed the nominal amount of the warrant bond or an issue price of the bond that is lower than the nominal amount. (5) Conversion price/option price, anti-dilution The conversion or option price of a share that is to be determined from time to time must be either at least 80% of the average closing price of the share of LEG Immobilien AG in Xetra trading (or a comparable successor system) on the ten stock exchange trading days in Frankfurt/Main prior to the date of the Management Board's resolution on the issuance of the Bonds, or at least 80% of the average closing price of the share of LEG Immobilien AG in Xetra trading (or a comparable successor system) during (i) such days, on which the subscription rights are traded on the Frankfurt Stock Exchange, except for the last two stock exchange trading days of subscription rights trading, or (ii) the days between the beginning of the subscription period and the date of the final determination of the subscription price. Notwithstanding section 9 (1) of the German Stock Corporation Act, the Terms and Conditions of the Bonds may provide for anti-dilution clauses in case that the Company should increase its share capital during the conversion or option period by granting its shareholders a subscription right, or issue further convertibles, option bonds and/or participation rights carrying a conversion and/or option right, or grant or guarantee 22
other option rights, and if the bearers of conversion or option rights are not granted a subscription right to an extent to which it should have been granted after their exercise of the conversion or option rights or after the fulfillment of a conversion obligation. The Terms and Conditions may provide for a value-preserving adjustment of the conversion and/or option price also when it comes to other measures of the Company, which may result in a dilution of the value of the conversion and/or option rights. In any event, the proportional amount of the share capital of the shares to be subscribed to per bond must not exceed the nominal amount of the bond or an issue price of the bond that is lower than the nominal amount. (6) Further structuring options The Terms and Conditions may determine that in the case of conversion or of exercise of an option, the Company may also grant own shares, shares from authorized capital of the Company or other consideration. It may also be provided for the Company to not grant Company shares to those entitled to a conversion or option, but to instead pay the equivalent in cash. Moreover, the Terms and Conditions of the Bonds may also provide that the number of shares to be obtained in case of an exercise of the option or conversion rights or after the fulfillment of the conversion obligations or the pertinent conversion right may be variable and/or that the option or conversion price may be changed during the term within a range to be determined by the Management Board, depending on the development of the share price or as a result of anti-dilution provisions. 23
(7) Authorization to establish the further Terms and Conditions The Management Board is authorized to establish the further details of issuing and structuring the Bonds, in particular interest rate, issue price, maturity and denomination, conversion and/or option price and the conversion and/or option period, or to determine them in consultation with the bodies of the group companies issuing the Bonds, by taking into account the above provisions. c. Change in Conditional Capital 2013/2015 The Conditional Capital 2013/2015, which was approved by the General Meeting on 24 June 2015 under agenda item 8c), is changed as follows: The share capital of the Company is conditionally increased by up to EUR 31,384,894.00 through an issuance of up to 31,384,894 new registered shares (Conditional Capital 2013/2016). The Conditional Capital 2013/2016 serves for issuing shares to the creditors of convertible and/or warrant bonds and/or participation rights carrying an option and/or conversion right and/or a conversion obligation (or a combination of such instruments), which were or will be issued based on the authorizations granted by the General Meeting of the Company on 17 January 2013 under agenda item 2a) and on 19 May 2016 under agenda item 8b. New shares are issued at the conversion or option price to be determined in each case in accordance with the respective authorization. The conditional increase in capital will be performed only insofar as use is made of conversion or option rights that are based on issued Bonds or insofar as conversion obligations that are based on such Bonds are fulfilled, and 24
insofar as the conversion or option rights and/or conversion obligations are not satisfied through own shares, shares from authorized capital or other benefits. The new shares will share in the profit as of the beginning of the fiscal year, in which they come into existence through the exercise of conversion and/or option rights or through the fulfillment of conversion obligations; notwithstanding the above, the Management Board may, if permitted by law, resolve with the approval of the Supervisory Board that the new shares will be able to share in the profit as of the beginning of the fiscal year, for which the General Meeting at the time of the exercise of conversion and/or option rights or the fulfillment of conversion obligations has not yet resolved on the appropriation of the net retained profit. The Management Board is authorized to establish the further details of the performance of the conditional increase in capital. d. Change in the Articles of Association Sec. 4.2 of the Articles of Association is changed and reformulated as follows: "4.2 The share capital is conditionally increased by up to EUR 31,384,894.00 through an issuance of up to 31,384,894 new registered shares (Conditional Capital 2013/2016). The conditional increase in capital will be performed only insofar as the bearers of conversion or option rights that are based on bonds or participation rights carrying a conversion and/or option right (or a combination of such instruments), which were issued by LEG Immobilien AG or by domestic or foreign companies, in which LEG Immobilien AG holds directly or indirectly the majority of the votes and capital, based on the General Meeting's authorization resolutions 25
dated 17 January 2013 and 19 May 2016, exercise their conversion or option rights or if conversion obligations that are based on such bonds are fulfilled, and insofar as the conversion or option rights and/or conversion obligations are not satisfied through own shares, shares from authorized capital or other benefits. The new shares will share in the profit as of the beginning of the fiscal year, in which they come into existence through the exercise of conversion and/or option rights or through the fulfillment of conversion obligations; notwithstanding the above, the Management Board may, if permitted by law, resolve with the approval of the Supervisory Board that the new shares will be able to share in the profit as of the beginning of the fiscal year, for which the General Meeting at the time of the exercise of conversion and/or option rights or the fulfillment of conversion obligations has not yet resolved on the appropriation of the net retained profit. The Management Board is authorized to establish the further details of the performance of the conditional increase in capital." 26
Report of the Management Board on item 7 Capital adequacy and adequate financing are a major basis for the further development of LEG Immobilien AG and for a successful capital market appearance. By issuing new shares as part of a capital increase, the equity of the Company and thus, also, the options for action within the scope of acquisitions as well as in connection with raising debt capital have been increased. The Management Board is to be provided with flexible options to take advantage of financing options in the Company's interest, and with the approval of the Supervisory Board, in order to use business opportunities and strengthen the Company's equity capital base. By General Meeting resolution of 24 June 2015, the Management Board was authorized to increase, with the approval of the Supervisory Board, the Company's share capital once or several times until 23 June 2020 by up to EUR 28,531,722.00, in total, by issuing up to 28,531,722 new registered shares against cash and/or in-kind capital contributions (Authorized Capital 2015). With the approval of the Supervisory Board, the Management Board of LEG Immobilien AG decided on 12 November 2015 to use part of the existing Authorized Capital 2015 and to increase the Company s share capital by a nominal amount of EUR 4,510,000.00 against issue of 4,510,000 new registered shares in the Company that are entitled to dividends for fiscal year 2015, excluding shareholder subscription rights. The capital increase took effect upon entry of performance into the commercial register on 13 November 2015. The Authorized Capital 2015 is therefore no longer available in full. In particular, the Management Board is only authorized to undertake a restricted capital increase subject to simplified exclusion of subscription rights. The Management Board and Supervisory Board believe it reasonable to continue to allow the Company to increase the share capital on short notice under exclusion of the subscription right in order to give the Company flexibility for further growth and any possible acquisitions which may present themselves. 27
The authorized capital is to amount to the statutory maximum limit of half of the share capital existing at the time that the resolution is taken. The plan is thus to resolve on a new Authorized Capital 2016, which in terms of content largely corresponds to the Authorized Capital 2015. With the proposed Authorized Capital 2016, the Management Board of LEG Immobilien AG will be able to, at any time, align the net equity base of LEG Immobilien AG to the business requirements within the specified limits and to act quickly and flexibly in the interest of the Company. In order to be able to do so, the Company must always have the necessary financing instruments available, regardless of concrete utilization plans. As decisions on the covering of capital needs are to be made on short notice normally, it is important for the Company not to depend on the intervals of the annual general meetings of shareholders and not to have to wait for extraordinary general meetings either. The instrument of authorized capital has therefore been created by law to address this issue. Common reasons for utilizing authorized capital include to strengthen the equity capital base and to finance the acquisition of shares. By means of the creation of the new Authorized Capital 2016, the Management Board is authorized to increase, with the approval of the Supervisory Board, the Company's share capital once or several times until 18 May 2021 by up to EUR 31,384,894.00, in total, by issuing up to 31,384,894 new registered shares against cash and in-kind capital contribution (Authorized Capital 2016). When utilizing the Authorized Capital 2016, the shareholders are generally entitled to a subscription right. Pursuant to section 203 (1) sentence (1) in conjunction with section 186 (5) of the German Stock Corporation Act, the new shares can also be taken on by one or several credit institutions that must undertake to offer them to the shareholders for subscription (so-called "indirect subscription right"). In this context, the Management Board, with the approval of the Supervisory Board, shall be allowed to design the subscription right such as to provide for direct and indirect subscription rights. The proposed authorization provides for the Management Board to be allowed to exclude the shareholders' subscription right, in whole or in part, in the below-described cases, in accordance with the legal provisions and with the approval of the Supervisory Board. 28
Exclusion of the subscription right for fractional amounts The Management Board shall be authorized to exclude the shareholders' subscription right for fractional amounts with the approval of the Supervisory Board. Said exclusion of the subscription right shall enable a practicable subscription and thus facilitate the technical aspect of a capital increase. The value of the fractional amounts is normally low, whereas the time and effort required to issue shares without an exclusion of the subscription right for fractional amounts is regularly much higher. When it comes to fractional amounts, the costs associated with trading in subscription rights would be out of proportion to the shareholders' actual benefits. The new shares, which as so-called "free fractions" are excluded from the shareholders' subscription right, will be used in the Company's best possible interest. The exclusion of the subscription right in these cases thus serves to make an emission more practicable and feasible. Exclusion of the right to subscribe to option and convertible bonds The Management Board shall be moreover authorized to exclude the shareholders' subscription right with the approval of the Supervisory Board, if and in as far as this is necessary to grant the bearers or creditors of conversion and/or option rights, and/or the bearers or creditors of financing instruments carrying conversion and/or option obligations, which will be issued by the Company or by domestic or foreign companies, in which the Company holds directly or indirectly the majority of the votes and capital, a subscription right to an extent they would be entitled to after the exercise of the conversion or option rights or after the fulfillment of a conversion or option obligation. The background to this is as follows: The economic value of the aforementioned conversion and/or option rights or of the Bonds carrying conversion and/or option obligations depends not only on the conversion and/or option price, but also and in particular on the value of the Company shares, to 29
which the conversion and/or option rights or the conversion and/or option obligations relate. To ensure a successful placement of the respective Bonds or, rather, to avoid a corresponding markdown during placement, it is thus common practice to include so-called anti-dilution provisions in the terms and conditions of the bond, which will protect those who are eligible from depreciation of their conversion or option rights as a result of a dilution of the value of the shares to be subscribed; the inclusion of such anti-dilution provisions in the terms and conditions of the bond or option is thus also provided for in the authorization to issue option or convertible bonds or participation rights, as proposed under agenda item 8b. In the absence of such dilution protection, any subsequent issuance of shares along with a granting of shareholder subscription rights would typically result in such a dilution of the value. In that case, the aforementioned anti-dilution provisions in the terms and conditions of the bond provide regularly for a reduction of the conversion and/or option price, having the consequence that the funds received by the Company in case of a later conversion or exercise of the option or later fulfillment of a conversion or option obligation are reduced or that the number of shares to be issued by the Company is increased. As an alternative, based on which a reduction of the conversion and/or option price can be avoided, the anti-dilution provisions normally allow for those who are eligible for Bonds carrying conversion and/or option rights or conversion and/or option obligations to be granted a subscription right on new shares to an extent they would be entitled to after the exercise of their own conversion and/or option rights or after the fulfillment of their conversion and/or option obligations. They are hence treated as if the exercise of the conversion or option rights or the fulfillment of possible conversion or option obligations had turned them into shareholders already before the subscription offer and as if already entitled to subscription to that extent; i.e., they are thus indemnified for the dilution of the value through the value of the subscription right, like all shareholders already participating. For the Company, this second alternative namely the granting of dilution protection has the advantage that the conversion and/or option price does not have to be reduced; it therefore serves for granting maximum cash inflow during later conversion or exercise of the option and/or later fulfillment of a 30
potential conversion or option obligation or, rather, reduces the number of shares to be issued in that case. The participating shareholders will also benefit from this, because it also means compensation for the restriction of their subscription right. Their subscription right, as such, remains intact and is reduced merely proportionately to the extent to which a subscription right is granted not only to the participating shareholders, but also to the bearers of the conversion and/or option rights or of the Bonds carrying conversion and/or option obligations. In case of an emission of subscription rights, the present authorization enables the Company to choose between one of the two above-described alternatives for granting dilution protection, by weighing the shareholders' interests against the Company's. Exclusion of subscription rights in case of capital increases for cash In case of capital increases for cash, the Management Board shall be authorized to exclude the subscription right pursuant to section 203 (1) sentence (1) and (2), section 186 (3) sentence (4) of the German Stock Corporation Act with the approval of the Supervisory Board, if the par value of the new shares does not fall short, substantially, of the stock exchange price of the already listed shares. It may be reasonable to use this option of excluding the subscription right if the Company wishes to take advantage of favorable market conditions quickly and flexibly and to cover, on very short notice, any capital needs that may arise in this context. The two-week subscription period that is required when granting a subscription right to the shareholders (section 203 (1) sentence 1 in conjunction with section 186 (1) sentence 2 of the German Stock Corporation Act) does not allow for comparatively short response times to current market conditions. Moreover, due to the volatility of the equity markets, market-oriented conditions can be normally achieved only if the Company is not bound thereto over a longer period of time. When granting a subscription right, section 203 (1) sentence 1 in conjunction with section 186 (2) of the German Stock Corporation Act require for the 31